'Zero danger' of euro breaking up


There is zero danger of the euro zone breaking up, the head of the currency's region's financial safety net said today, adding that the situation in the euro area was serious nonetheless.

"There is zero danger," Klaus Regling, chief of the European Financial Stability Facility (EFSF), told German daily Bild when asked if the euro zone could break up. "It is inconceivable that the euro fails.

"No country will give up the euro of its own will: for weaker countries that would be economic suicide, likewise for the stronger countries. And politically Europe would only have half the value without the euro."

The euro fell earlier this week after German chancellor Angela Merkel alarmed markets by saying the single currency was in an "exceptionally serious" situation.

Her comment prompted one European Central Bank policymaker, Ewald Nowotny, to voice irritation at Ms Merkel for not "differentiating between the euro as a currency and the problems of individual (euro zone) states".

Euro zone policymakers are hoping that Spain and Portugal can stave off an Irish- or Greek-style debt meltdown.

A Reuters poll this week showed 34 out of 50 analysts surveyed believe Portugal will be forced to follow Ireland and ask for help. In a separate survey only four out of 50 economists thought Spain would seek external aid.

"Of course the situation is serious," Mr Regling said when asked about Ms Merkel's comments. He said there was no way France and Italy were in danger.

"Italy has come through the crisis well and has its state deficit in hand. And France has the same credit standing as Germany," he added.

To help a euro zone country, the EFSF would issue bonds on the market which would be backed by up to €440 billion worth of guarantees from euro zone governments.

Mr Regling said he had spoken about such issues with 150 of the largest investors in the world including sovereign funds, pension funds, central banks, insurers and commercial banks.

"They are all very interested," he said.